Report: Some regs could spur growth

Challenging a flood of firsthand business testimonials about the burden of federal red tape, new research by environmental and consumer groups suggests some regulations might even lay the groundwork for a lasting economic recovery.

Story Continued Below

Republican congressional leaders, seeking to roll back 10 upcoming rules, have been bringing entrepreneurs to Capitol Hill to make personal cases for less federal regulation.

But in a new report, the liberal-leaning Economic Policy Institute has found the compliance costs for all of the administration’s new Environmental Protection Agency regulations represent just 0.1 percent of the economy — a burden for some but not the job-killing death blow that many Republicans complain about.

“These regulations are a minor component of the entire economy and are something that the economy can absorb,” said Isaac Shapiro, director of EPI’s regulatory policy research.

The entrepreneurs hosted earlier this month by GOP lawmakers beg to differ. And the argument that regulations stifle growth has gained some traction with the public and President Barack Obama.

Earlier this month, the White House delayed introducing smog standards out of sensitivity toward reducing regulatory burdens. And a recent poll by the Republican-affiliated Tarrance Group found a majority of likely voters said they have been negatively affected by regulations on employers and the financial industry.

“They see regulations as costing them more money,” said Gretchen Hamel, who commissioned the survey as executive director of the independent group Public Notice. “Everyone has become more sensitive to costs.”

House Speaker John Boehner invited 13 businessmen to watch Obama’s Sept. 8 jobs address to a joint session of Congress, taking the time beforehand to hear their individual stories and in some instances have staff record video interviews for his blog.

Gordon Logan said his men’s salon franchise Sport Clips could have added more than 50 locations were it not for last year’s Dodd-Frank Wall Street reforms. Higher lending standards meant his franchisers could not obtain loans.

“There are unintended consequences from legislation with good intentions,” he told POLITICO.

The National Cement Co. of Alabama backed off plans to construct a $350 million kiln because of changing requirements by the EPA, said its president, Spencer Weitman.

“We have struggled for several years with numerous uncertainties regarding the EPA regulations — which EPA rules apply, the timing imposed by the various rules, the standards we must meet and whether those standards are actually achievable,” he said.

Weitman told POLITICO that the uncertainties caused him to put the project on hold, though he said in recent months the chief obstacle has been flagging demand across the economy.

If better standards were in place, she estimates that businesses sitting on $2 trillion in cash reserves would have bought and installed new equipment, possibly generating tens of thousands of jobs. On her blog, Johnson criticized Obama for choosing to delay the rules.

“The most unfortunate aspect of this bad decision,” Johnson wrote, “is that the president has given an official blessing to the polluters’ worst propaganda and perpetuated the decades-old myth that public health and environmental protection must be traded off against jobs.”

And pushing back the date when new rules get implemented won’t remove the air of uncertainty that companies say has stopped them from investing.

“If you’re continually delaying and delaying them, it’s just not helpful,” Johnson told POLITICO. “At some point, it will happen.”

A 2010 EPA analysis said the tighter standards should cost $19 billion to $25 billion, while generating economic benefits of up to $37 billion.

The difficulty is that analyses are open to interpretation in a way that first-person testimonies are not, since the outcomes depend on what gets plugged into complex equations.

Susan Dudley, a top regulatory official in George W. Bush’s White House, said the benefits in the EPA report were overstated because it overcalculated the financial value of the number of lives that would be saved.

But there are benefits to regulation that cannot be inserted into questions of costs and benefits. A new report by Public Citizen documents five major instances in which the introduction of government regulations led to breakthrough innovations.

“In some ways, what happens is regulation sort of rallies business’ motivation,” said Taylor Lincoln, a research director for the consumer advocate group. “Industry has an incentive to come up with a better mousetrap.”

For example, increased energy efficiency for refrigerators, washing machines, air conditioners and other appliances will save consumers more than $13 billion a year through 2030.

The report highlights a story line in which industry initially opposes “expensive” new regulations — for aerosol cans, vinyl or light bulbs — and then develops a less costly fix.

“The cycle is instructive in light of the philosophical debate over regulations that permeates American politics today,” the Public Citizen report said. “If today’s anti-regulatory ideologues prevailed when the issues in this report were being discussed, industries would not have been pushed to develop the solutions that they eventually achieved.”